"Look at it. What is it?" On a beautiful day, I'm standing outside Newcastle's Baltic arts centre with Paddy McAloon. We're considering the huge, rusty sculpture that almost blocks the centre's entrance and has a most distinctive shape. This is the handiwork of Antony "Angel of the North" Gormley, who we have just passed upstairs. Isn't it, I suggest, more reminiscent of a certain aspect of Jennifer Lopez? At which point Mr McAloon - a man I thought, before I met him, might be the most precious on God's earth - screws up his eyes in delight and squeaks with laughter. "Yes!" he exults. "It's the Bum of the North!"

For those who haven't heard of Paddy McAloon, it's worth recalling that, back in the Eighties, his band Prefab Sprout's album Swoon was hailed as a breathtaking debut, too good for the charts (which it didn't unduly trouble). McAloon was the kingpin, a soulful Geordie with a beautiful voice, and a great songwriter. He knew it, too; in 1985 he said, "I know I'm probably the best writer on the planet. Who are my rivals?"

Of late, though, McAloon has not been much in evidence. That is partly because, at 45, he's a hermetic recluse who, by the last promo tour, had filled out, grown a long white beard and looked like Santa's philosophical younger brother - and partly because he's now visually impaired, with detached retinas that have required extensive surgery.

Despite - perhaps because of - that, he has a new record, a solo debut. Unable to read, he has spent long hours listening to the radio and, from snatches of confessional late-night phone-ins movingly arranged against a backing of lush orchestration, he has produced something extraordinary.

Now, the long hair and beard are gone; in fact, with an iron-grey Just William crop and a surprising tendency to giggle, he brings to mind David Hockney or (how he'll hate this) an animated Alan Bennett. The giggling, it transpires, is largely anxiety.

Born in Langley Park, County Durham, McAloon attended a Catholic seminar as a boarder. Asked if the atmosphere of the place made him meditative, he replies: "I think it perhaps intensified the hobbies. Little obsessive things. I wanted to write songs so badly. My first attempts were actually just lyrics, on a piece of paper cut like a record. It's terrible, isn't it?" The paper was circular? "Oh, that would've been much better. A Bridget Riley installation. No, just the shape of a sleeve. Made me feel I was getting closer to the goal of writing music." He smiles. "But I wasn't."

Today he says he couldn't bear to listen to Swoon: "Words everywhere, odd song shapes. These are the things people liked about it; they didn't like it when I got straight. One chap, a hardliner, told me that I later made a cynical cop-out. Devastating, because by then my thinking was, if you can do things simply and clearly, that's a wonderful achievement." I observe that it's very hard to be effectively simple. He sits forward. "It is. And I felt hyper-busy because, as soon as I settled on a chord - this'll sound silly - I thought, well, someone else has already used it. Over-prizing of originality. But now I look back at that young man writing strange, strange songs and I think, the world could do with more of that."

Swoon was followed by Steve McQueen, a lovely thing, from the hallmark track "Appetite" to "When Love Breaks Down", which McAloon admits was very personal - he always put work before relationships: "It was just, you were in love with what you did. And even then I didn't realise how little time there is, that you only have a window of opportunity to get your work done."

The music continued, lusher and more beautiful, through Jordan: The Comeback and Andromeda Heights to bread-and-butter stuff for Jimmy Nail ("Crocodile Shoes") and The Gunman and Other Stories, whose title track was recorded by Cher on her It's a Man's World album. ("She didn't like it," remembers McAloon. "Apparently said it was the weirdest thing she'd ever been sent...")

Then, in 1999, he began to go blind. "It just happened. Normally a detached retina is the result of a boxing injury, but it can be a congenital thing. They said if it happens in one eye, there's a chance it'll happen in the other. Which it did. So. The retina tears and the retinal fluid washes it off, so you have no film in your camera, that's the phrase they use. And, um, they have techniques of trying to repair that with laser surgery or cryogenics. And also they put things in your eyes that press your eye against the retina. It's like a buckle; you can see mine..." He leans toward me and pulls his eyelid away, and I see, at the side of his very inflamed eyeball, a solid lump inside the eye. "And I have a new one, which is threatening to come out." He shows me the other eye, and I can almost see metal through the membrane. "It's effective. But it could tear again and, if it does, there aren't many things they can do. There's some new treatment where they haul the jelly out of the eye." Oh, God. "I haven't asked what they put in its place, but it's risky, the last throw of the dice." He sips from a glass of water. "To think I was always too vain for contact lenses. Too vain to have anybody put something in my eye. It's amusing. When now, it's like Jodrell Bank in there."

The intermission between diagnosis and treatment brings us to I Trawl the Megahertz, conceived in radio-filled darkness. The album is unspeakably poignant - Bernstein-esque washes of orchestration and passages that evoke McAloon's favourite composers, Debussy and Ravel, coupled with words of intelligence and desperate sadness. The title track, a 22-minute symphony with a spoken narration by an American female vocalist, is heartfelt but off-hand, as bitter as all the best tales of loss. I refuse to believe that the lines are from phone-ins - they're too beautiful - but McAloon insists that most of them are, or from documentaries. He tells me how he worried about finding the right narrator ("I wanted to make a record I could listen to, so it couldn't be me singing, because I can't stand my voice") and how he found her, a London-based commodities broker. The result is exquisite: that track, the several intrumentals, "I'm 49", a disquisition on near-breakdown, and "Sleeping Rough", the only track on which he sings. Even now, though, he's racked about it all, convinced there's so much wrong.

A self-confessed obsessive, he has written many albums that haven't seen the light of day because he can't bear the recording process - "Personality clashes, having to say to somebody, 'Would you please do that again?'" A demo can destroy him, as he re-records and re-records until "I hate myself, hate the song." Real creativity doesn't have to be soldered to neurosis; but it often is. And neurosis is exhausting, a taskmaster who will never let you rest. On the other hand, it puts certain things in perspective. "Say, for example," McAloon is musing later, "you were having a casual worry about mortality, the way you do. When you were young, it seemed so far away, but the truth of it is, you were never far from death. And that cheers me up."